Last year the Chinese government cracked down on initial coin offerings (ICO) and stopped all domestic cryptocurrency exchanges from dealing with the renminbi. According to local reports and the central bank’s recent ‘2018 agenda,’ the People’s Bank of China aims to finish what it started in 2017 by “rectifying” all virtual currency operations, introducing new “reforms and supervision.”
The PBOC Aims to Strengthen Virtual Currency Supervision
Ever since last year, China’s central bank has had it out for cryptocurrencies and digital asset exchanges. The People’s Bank of China (PBOC) first cracked down on ICO projects by making them illegal, but then soon after the bank made domestic cryptocurrency exchanges close down their operations. It’s been well over a year since these events occurred, but people continue to follow the PBOC’s actions to see if the government will allow digital currency exchanges to reopen. So far it doesn’t look positive, additionally, there have been indicators pointing to the bank possibly creating its own central bank digital token.
Just last week the PBOC revealed it will be taking further action against cryptocurrency operations including multi-level-marketing schemes. According to the vice governor of PBOC, Fan Yifei, the central bank is pursuing research towards its own digital renminbi.
“The rectification of all types of virtual currencies will be carried out,” the vice governor states.
First, we will intensify reforms and innovations to promote the central bank’s digital currency research and development; Second, the bank must strengthen supervision and rectify all types of virtual currencies.
Are Public Blockchains Like Bitcoin Taking the Heat Because the Bank Plans to Create a Digital Renminbi?
Further on April 3 the PBOC’s director general of financial research, Sun Guofeng, explains that traditional fiat money has adverse effects on the economy’s interest rates and a PBOC issued cryptocurrency would bolster interest rate measures. From the many reports over the years, China has been interested in developing its own cryptocurrency and the central bank has been involved in a lot of blockchain research to progress this effort. Guofeng believes a PBOC digital currency could help negative interest rate methods, and so the central bank’s R&D efforts should be sped up.
“In the long run, due to the lower natural interest rate, monetary authorities can incorporate negative interest rate policies into the normal monetary policy toolbox,” explains Sun Guofeng.
While the central bank’s digital currency is conducive to the implementation of negative interest rate policies, the central bank should speed up the development of a central bank issued digital currency.
It’s been said that the Chinese government still doesn’t look at cryptocurrencies favorably, but has allowed the idea of blockchain concepts to flourish. Speculators believe a digital renminbi issued by the PBOC is enough circumstantial evidence for the bank to crack down on public blockchains like bitcoin. There’s currently no information on how the PBOC plans to “rectify” or add more reform and supervision towards the cryptocurrency situation in China. There have been many reports detailing how the PBOC was monitoring domestic exchanges that have moved abroad, and the over-the-counter digital currency market taking place under the central bank’s watchful eye.
What do you think about the central bank of China’s plan to rectify the cryptocurrency market? Let us know what you think in the comments below.
Images via Pixabay, Shutterstock, and the PBOC logo.
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Author: Jamie Redman